Chavanna v. Gianni

A-5841-97T2 (N.J. Super. App. Div. 2000) (Unpublished)
  • Opinion Date: April 19, 2000

CONTRACTS; SURVIVAL—A provision in a residential house sale contract clearly cutting off survival of representations and warranties by a selling homeowner will be enforced.

Buyers, after closing on a converted bungalow that was in generally poor condition, discovered that the septic tank was not functioning properly and also came to realize that the extremely low water pressure in the house adversely affected their use of the plumbing facilities. The preclosing inspection, pursuant to a relatively standard inspection contingency provision in their contract, revealed the low pressure situation, but did not reveal the problem with the septic system. In fact, their inspector concluded that the “Septic System passed on this date.” The Court, examining the record created by the lower court, concluded that there was no flaw on the part of the seller. Any actions taken by the seller with respect to the septic system were taken for legitimate purposes, and the Court did not believe that the seller was aware that the septic system was defective or was likely to fail shortly after the closing. Moreover, the contract expressly provided that “the buyer acknowledges that the property is being sold in an ‘AS IS’ condition.” It contained a standard home inspection contingency. The paragraph entitled “NO RELIANCE ON OTHERS” specifically stated: “THIS MEANS THAT THE PROPERTY IS BEING SOLD ‘AS IS’, EXCEPT AS OTHERWISE MENTIONED IN THIS AGREEMENT.” Further, the contract stated: “UNLESS OTHERWISE INDICATED IN THE ADDITIONAL CONTRACTUAL PROVISIONS SECTION ... OF THIS AGREEMENT, ALL REPRESENTATIONS AND/OR STATEMENTS MADE BY THE SELLER IN THIS SECTION, SHALL NOT SURVIVE CLOSING OF TITLE. This Means That The Seller DOES NOT GUARANTEE the condition of the premises AFTER the deed and affidavit of title have been delivered to the Buyer at the ‘Closing.’” Prior case law held that “an implied warranty of habitability should also apply to the sale of a ‘used’ home.’” In addition, prior case law held that, “a properly working septic or sewer system is an item included within the implied warranty of habitability.” The case from which those two principles were drawn did not deal with a contract which included no such warranties or provided for the merger of all warranties into the deed. Here, where there was no suggestion of overreaching and there was an alternative available to the buyer—an inspection contingency—the Court could come up with no reason why such a contract provision should not be honored. In the Court’s mind, the seller was not a commercial entity, skilled in what it does. There was no inequality of bargaining power. While the buyer had a right to expect that the basic systems of the house would operate properly, the seller had a right and expectancy to regard the transaction, and its potential liability, as resolved not later than closing. The buyers had full opportunity to inspect, complain, and if necessary back out. To the Court, it would be unreasonable to expose the seller to potential liability respecting the condition of the house after it had been sold. This defect was not an obscure latent condition which a professional inspector might not know to examine. Here, the inspector examined both the water supply and the septic system. The inspector may have been wrong about the septic system, but that would be a matter between the buyer and its inspector. With respect to the water system, the buyers knew, before closing, that the water pressure was inadequate. Consequently, the judgment of the lower court in favor of the buyers was reversed and the seller was able to enjoy the benefit of the contractual provisions that cut off its warranties and representations at closing.